By
RICHARD A. FINEBERG
July 1, 2008 *
With the nation's
worried eyes riveted on rising gas pump prices and the national energy
debate often characterized by rhetoric, not reason, drilling advocates
hope the fears of a panicky public in an election year will cause Congress
to open the Arctic National Wildlife Refuge to oil drilling.
But little-noticed
data from the domestic oil front reveal important trends that dump copious
quantities of cold water on the current oil drilling frenzy that threatens
a national treasure. First, a calm look at domestic oil production, consumption
and import figures reveals that the folks who cry about rising dependency
on foreign oil are simply wrong.
- Fact: For the first
time in the last quarter century, since 2005 net petroleum imports -
the figure that the U.S. Energy Information Administration (EIA) uses
to measure dependence on foreign oil - have exhibited a decreasing trend.
Today, both net petroleum imports and total domestic consumption are
slightly lower than they were in 2004. (1) (For
historical imports and consumption chart,
click here.)
While the decrease
in domestic consumption and imports is slight, the break from the historical
trend is striking. Even more important: Looking forward, the EIA foresees
a pronounced decline in the percentage of net petroleum imports in coming
decades. (2) (For EIA import projections, click
here.)
These developments,
largely unnoticed in the national energy debate, have momentous consequences.
In the last three years reductions in domestic petroleum consumption and
early implementation of alternative technologies have led to significant
reductions in projected oil imports that dwarf the production potential
of the Arctic Refuge. When national trends reported by EIA are extended
out to the year 2050, this nation is already on track to achieve a reduction
in imports of more than 100 billion barrels of oil through conservation
and alternative technologies. By comparison, potential production from
the Arctic Refuge Coastal Plain region during the same period is estimated
to be far less than 10 billion barrels of oil. (3) (For
Fineberg report, click
here.) From these data, it is clear that the proposal to seek
oil on the Coastal Plain of the Arctic Refuge can be dismissed as a misguided
distraction from the urgent energy tasks at hand.
Over the past decade,
environmentalists have been able to counter the misinformation of the
drill worshippers by providing substantive information to Congress and
the public about the environmental aspects of Arctic development and the
small role Arctic Refuge oil would play in the national energy picture.
But today, as drilling advocates steadily thump their inaccurate and misleading
drums, in the hysteria caused by high oil prices, important facts and
meaningful solutions get lost.
Consider, for example,
the myth that Arctic Refuge oil could be produced from just 2,000 acres
of land. The development history of the Prudhoe Bay complex and a three-year
study of the geology of the Arctic Refuge Coastal Plain by the U.S. Geological
Survey (USGS) refute the notion that the Arctic Refuge can be developed
from a 3.1 square-mile postage stamp development. The Prudhoe Bay development,
to the west of the Arctic Refuge, cuts a sprawling, 100-mile swath across
the undulating Coastal Plain of the North Slope. On the western flank
of the Prudhoe complex, the recent development of the Alpine field demonstrates
that the environmental impacts are significant, despite technological
advances. Meanwhile, the three-year assessment of Arctic Refuge potential
completed by the USGS in 1998 shattered the dream that the Arctic Refuge
might contain a super-giant field like Prudhoe Bay. Instead, the USGS
concluded, any oil discovered beneath the Arctic Refuge Coastal Plain
would likely be found in a number of smaller deposits. The USGS mean estimate
of technically recoverable oil - 10.4 billion barrels - was based on a
scenario in which the largest undiscovered field beneath the Arctic Refuge
Coastal Plain would produce 1.4 billion barrels. EIA estimates that the
largest field and the six next largest undiscovered fields would yield
about 40% of Arctic Refuge production; 2.6 billion barrels of that amount
would be produced between 2018 and 2030; in EIA's view, three-quarters
of Arctic Refuge production would not come until after 2030. (4)
Based on USGS estimated field sizes, it would take the discovery
and development of 30 additional, smaller fields to reach the 10.4 billion
barrel total. (5)
In the face of the
best information available, people who should know better - from Alaska
Senator Ted Stevens and Congressman Don Young to energy experts at the
oil-oriented University of Alaska in Fairbanks - continue to perpetuate
the myth that the Arctic Refuge oil could be produced from an area smaller
than 2,000 acres. (6) Despite the evidence of the Prudhoe
Bay experience and the best estimates of the USGS, the 2,000-acre myth
has found its way into Arctic Refuge drilling proposals. As if legislative
language can make it so, the Drill Worshippers blindly assert that the
Arctic Refuge can be developed from a 2,000-acre postage stamp.
The 2,000-acre myth
is one of many exaggerated claims by drilling advocates. Senator Stevens
repeatedly rewrites history to fuel hopes that the Arctic Refuge will
yield far greater quantities of oil than estimated. In the latest version
of this story, Senator Stevens told his colleagues that the Prudhoe Bay
field was originally estimated to hold one billion barrels of oil but
will produce 18 billion. (7) In fact, seven months after
the Prudhoe Bay discovery, the geologic consulting firm DeGolyer &
McNaughton, retained by the discoverers, reported that Prudhoe Bay held
nearly 10 billion barrels of recoverable oil. Due to exceptional geology
and technological developments, the largest producing oil field ever discovered
in the United States has exceeded initial estimates, with approximately
13 billion barrels lifted in its first 31 years and more than two billion
barrels estimated remaining to be produced. These are impressive figures,
to be sure, but nothing like the version of history spouted by Senator
Stevens. As noted above, the 1998 USGS report effectively scotches the
notion that the Arctic Refuge Coastal Plain holds another Prudhoe Bay.
(8)
In his May 1, 2008
"Dear Colleague" letter, Congressman Young proclaimed that the
Coastal Plain of the Arctic Refuge holds a 30 year supply of oil capable
of producing 1.0 million barrels of oil per day (bpd). (9) The
congressman, too, is playing fast and loose:
Continued Below
(Click Here)
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Drill
Worshippers Take Note: Domestic Oil Use, Imports
on
Declining Trend
(Continued)
In addition to boosting
the volume of oil that might be discovered and cutting the acreage required
to develop whatever oil might be discovered, the Drill Worshippers routinely
ignore or downplay the oil industry's dubious environmental performance
in Alaska. In 2007 BP paid a $20-million penalty for its North Slope corrosion
problems that caused a 200,000-gallon oil spill and a partial shutdown
at the nation's largest oil field early in 2006. (14) Eight
years earlier, BP and one of its contractors, Doyon Drilling, accumulated
even larger penalties for the illegally reinjecting hazardous wastes beneath
the permafrost at the Endicott field between 1993 and 1995. (15)
Together with ConocoPhillips and ExxonMobil, BP controls more than 95%
of North Slope production and a roughly similar percentage of the Trans-Alaska
Pipeline System (TAPS), the 800-mile pipeline that links the North Slope
to the ice-free port of Valdez. The U.S. pipeline safety office hit TAPS
with the largest fine assessed against any pipeline in the nation in 2007.
(16) The shortcomings in Exxon's Alaska shipping operations
were revealed in 1989 when the tanker Exxon Valdez grounded on Bligh Reef
in Prince William Sound, unleashing what is generally regarded as the
worst oil spill in the nation's history. (17) It is difficult
to reconcile this dismal track record with Drill Worshipper assurances
that the Arctic Refuge can be developed safely.
The major congressional
battles over Arctic Refuge development in 1995, 2002 and 2005 were hard
fought. In the course of those debates, many members of Congress grappled
with the technicalities of finding and producing oil and came to understand
the short-sightedness of risking a national treasure for an unknown quantity
of oil that, in all probability, would be too small to make much of a
dent in the nation's long-term petroleum deficit problem. But this time
around, gas pump prices in excess of $4.00 per gallon and the environmental
focus on climate change appear to be crowding out important facts that
should inform consideration of issues such as Arctic Refuge development.
In this frenzied debate,
Senator Stevens once again contributes to the confusion by confabulating
the distinction between the current tight oil market and the long-term
imbalance between domestic supply and demand. On one hand, Senator Stevens
rails against his Democratic colleagues, who say that increased production
from Saudi Arabia right now could reduce gasoline prices by $0.25 to $0.50
per gallon. The senator accuses his colleagues of inconsistency because
they seek increased production from the Saudis while saying that future
production from the Arctic Refuge would have a negligible effect on gasoline
prices. (18)
Listening to Senator
Stevens' tirade on this subject, one might be surprised to learn that
the senator agrees with his Democratic colleagues that current oil price
increases are driven in large part by speculators. (19)
Senator Stevens makes no distinction between the immediate act of importing
oil to alleviate the current tight market and the long-term hope of producing,
at a future date, a similar quantity of oil from the Arctic Refuge. But
once again the senator is blowing smoke; these immediate and long-term
developments would be played out in different theatres. An immediate slug
of oil, might reduce prices relaxing a tight domestic market. But on the
long-term stage, the fact remains that the U.S. consumes approximately
24 percent of the world's daily oil production but possesses less than
three percent of the world's oil reserves. In this situation, experts
say, the Arctic Refuge's relatively small addition to the world's reserves
- estimated to yield less than one per cent of total world production
daily at peak - will not have a significant effect on the base price of
oil or gasoline. (20)
Energy security and
the pain of high oil prices are problems of paramount national importance
that cause serious drains on individual pocketbooks, and on the national
economy. The process of policy formulation is inevitably complicated by
the fact that nobody comes to the table with a crystal ball. All too often,
the resulting national discussion casts reason to the winds. But to deal
with these challenges, it is essential to consider carefully the trade-offs,
costs, benefits and feasibility of each energy proposal in their broader
context. This effort requires a pressing need to ensure deeper understanding
of the issues, and to elevate those understandings with facts and common
sense.
Unfortunately, when
it comes to the Arctic Refuge, the Drill Worshippers fail these important
tests with flying colors. Senator Stevens leads the pack in this regard.
Over the years, the senator has demonstrated a disturbing willingness
to pin Arctic Refuge development to the coattails of current national
energy concerns by bending facts and using using parliamentary legerdemain
to suit his obsession. (Witness, for example, Senator Stevens' attempt
to tie the Arctic Refuge to Iraq war funding and Hurricane Katrina disaster
relief as Congress prepared to adjourn for the Christmas holidays in 2005.)
This commentary spotlights
the folly of drilling for oil in the Arctic National Wildlife Refuge by
focusing on national energy trends, as well as specific examples of misinformation
regarding Arctic Refuge development. For more detailed discussion of the
economic aspects of Arctic Refuge development, click here to see this
writer's recent report to the Alaska Wilderness League (AWL).
Endnotes to "Drill
Worshippers"
1. 1985 - 2005 - U.S.
Energy Information Administration (EIA), Annual Energy Outlook Retrospective
Review, 2006, Tables 5 and 7; 2006 - 2008 - EIA, Monthly Energy Review,
May 2008, Table 3.1.
2. Since 2004, EIA's
estimate of oil imports two decades from now has declined significantly,
from over 70% to 54% in 2008. See charts presented by EIA Administrator
Guy Caruso, appended to this writer's report, Existing Conservation
and Alternative Technology Gains Far Outweigh Arctic National Wildlife
Refuge Potential; Oil Imports Have Declined Significantly Since 2005
(Alaska Wilderness League), June 4, 2008, Appendix A.
3. See: Existing
Conservation and Alternative Technology Gains Far Outweigh Arctic National
Wildlife Refuge Potential, pp. 9-14.
4. EIA, Analysis
of Crude Oil Production in the Arctic National Wildlife Refuge, May
2008 (Report No. SR/OIAF/2008-03), pp. 3-6 (http://www.eia.doe.gov/oiaf/servicerpt/anwr/index.html).
5. Author's estimate,
based on U.S. Geological Survey (USGS) data. (See: USGS, The
Oil and Gas Resource Potential of the Arctic National Wildlife Refuge,
1002 Area, Petroleum Assessment, 1998, Including Economic Analysis,
USGS Fact Sheet FS-028-01, April 2001 [http://pubs.usgs.gov/fs/fs-0028-01/fs-0028-01.pdf],
Figure 5).
6. See, for example:
Congressman Don Young, "Dear Colleague," May 1, 2008.
7. Senator Ted Stevens,
"Senator StevensCalls for Oil and Gas Development in Alaska,"
May 1, 2008 (press release).
8. Prudhoe Bay discovery
history - Jack Roderick, Crude Dreams, A Personal History of Oil &
Politics In Alaska (Epicenter Press, 1997), p. 222. (Senator Stevens
praises this history as "[a] real treasure trove of historical fact
which reads like an adventure story."). Prudhoe Bay production -
Estimated from: Alaska Department of Natural Resources, Division of Oil
and Gas, Alaska Oil & Gas Report 2006, pp. 3-2 and 3-6.
9. In his May 1, 2008
"Dear Colleague" letter, Congressman Young implies that this
exaggerated and misleading estimate comes from unnamed opponents of Arctic
Refuge drilling. He offers no documentation on this point.
10. Analysis of
Crude Oil Production in the Arctic National Wildlife Refuge, May 2008
(Report No. SR/OIAF/2008-03), pp. 5, 8. EIA's estimated Arctic Refuge
mean resources case scenario production profile between first production
in 2018 and 2030 is calculated by subtracting Alaska reference case annual
production totals (without Arctic Refuge development) from the corresponding
Alaska totals under the Arctic Refuge development mean resources case
in Table 11 of the EIA reference and Arctic Refuge mean resource case
scenarios, posted on line with its May 2008 report. (The EIA's figures
are essentially the same as the agency's 2007 estimate in 2007; see "Analysis
of Crude Oil Production in the Arctic National Wildlife Refuge [Mean Resource
Case]," [Table 11], Annual Energy Outlook 2007, p. 202.)
11. 10.4 billion barrels
is the U.S. Geological Survey's estimate of the mean volume of technically
recoverable oil that might lie beneath the Arctic Refuge Coastal Plain
(U.S. Geological Survey, Arctic National Wildlife Refuge, 1002 Area,
Petroleum Assessment, 1998, Including Economic Analysis [fact sheet],
Table 1. Since this figure is based on geologic assessments, it does not
vary with oil price changes.
12. The importance
of this distinction was made painfully clear in the early 1980s, when
the near-shore waters of Alaska's Beaufort Sea coughed up what U.S. Interior
Department has called "the most spectacular failure in the history
of petroleum exploration." It was called Mukluk and it was thought
to contain up to 10 billion barrels of recoverable oil. For the rights
to Mukluk, bidders spent an estimated $1.6 billion. They were sadly disappointed.
Plugged and abandoned early in 1984, to this day Mukluk remains, by most
accounts, the most expensive dry hole ever drilled. (See: Northeast National
Petroleum Reserve - Alaska, Final Integrated Activity Plan / Environmental
Impact Statement, "III. Description of Affected Environment; (2)
Petroleum Geology," 1998 [accessed in January 2005 at http://aurora.ak.blm.gov/npra/final/html/3a1a2.html).
Shortly after Mukluk came up dry, Texaco, a crude-short giant with an
interest in Mukluk, launched its famous battle with Pennzoil for the crude
oil resources of Getty Oil. Thomas Petzinger, Jr., Oil & Honor:
The Texaco-Pennzoil Wars (G.B. Putnam's Sons, 1987), pp. 138-9, 153,
185, 214.
13. EIA, Potential
Oil Production from the Coastal Plain of the Arctic National Wildlife
Refuge: Updated Assessment, May 2000 [Report No. SR/O&G/2000-02],
Table 3 and Figure 3).
14. U.S. Department
of Justice, "British Petroleum to Pay more than $370 Million in Environmental
Crimes, Fraud Cases: Charges Result from 2005 Texas Refinery Explosion,
Alaska Pipeline Leaks and Attempts to Manipulate Markets" (press
release), Oct. 25, 2007. For this writer's reports on BP's North Slope
corrosion problems, click here.
15. U.S. Department
of Justice, "BP Exploration [Alaska] Sentenced for Environmental
Crime; Court Orders $500,000 Fine and Establishment of Nationwide Environmental
Management System" (press release), Feb. 1, 2000.
16. U.S. Department
of Transportation, Pipeline and Hazardous Materials Safety Administration
(PHMSA), Notice of Probable Violation, Proposed Civil Penalty and Proposed
Compliance Order ("NOPV;" CPF 5-2007-5041), p. 12; and Notice
of Amendment (CPF 5-2007-5042M), Nov. 27, 2007 (letters from Chris Hoidal
[Director, Western Region, PHMSA] to Mr. Jim Johnson [Pipeline Vice President,
Alyeska]). (First reported on this web site.)
17. See: State of
Alaska, Spill: The Wreck of the Exxon Valdez - Implications for Safe
Marine Transportation (Report of the Alaska Oil Spill Commission),
January 1990.
18. Senator Ted Stevens,
"Senator Stevens Highlights Inconsistencies in Anti-Drilling Stance,"
May 23, 2008 (press release).
19. In fact, Senator
Stevens has joined with one of his Democratic colleagues to introduce
legislation designed to make it illegal for speculators to drive up current
oil prices. On June 13, the senator acknowledges that oil speculators
are responsible for a significant portion - perhaps 30 to 35 percent -
of the oil price run-up. (Senator Ted Stevens, "Senators Stevens
and Feinstein Introduce Legislation to Limit Excessive Speculation in
Energy Markets," June 13, 2008 [press release].
20. EIA's mean resources
case per-barrel price effects for 2025 are summarized in Analysis of
Crude Oil Production in the Arctic National Wildlife Refuge, p. 11;
gasoline price effects can be calculated from Table 12 of the EIA reference
case (without Arctic Refuge development) and Arctic Refuge mean resource
case scenarios .
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